Euro price forecast 2 December 2020

2020-12-02

Euro takes a jump. Forecast as of 02.12.2020Dmitri Demidenko

The single European currency has satisfied the buyers amid the increase in global risk appetite and resumed talks in Congress about new US fiscal stimulus. Where will the EURUSD go? Let us discuss the Forex outlook and make up a [EURUSD][1] trading plan.

Monthly euro fundamental forecast

COVID-19 has become a disaster, but the development of vaccines inspires hope for the better. The pandemic’s economic fallout has turned out to be not so horrible as it was expected just six months ago. Furthermore, an adequate man has become the US president. Yes, there are still be economic consequences of the pandemic, but the global economy can well get over the crisis in a better state than many have worried about. Investors have quite a number of reasons to be optimistic, and they are hurrying up to buy. The [S&P 500][2] in 2020 breaks records for the 27th time, the [Nasdaq Composite][3] – for 46th time. The [EURUSD][1], closely related to the US stock indexes, has broken out level 1.2 at the second attempt, hitting the highest level since May 2018.

The uncertainty resulted from the pandemic is so strong that the OECD presented two forecasts in the summer. Neither of the forecasts was preferable. The first one suggested a single shock from COVID-19; the second implied double damage. In November, the global economic data turned out to be stronger than both forecasts, which has supported the increase in the global risk appetite.

OECD forecasts

Source : Financial Times

According to the OECD gauge, many world economies won’t recover to the pre-crisis levels in 2021. The introduction of the vaccines doesn’t mean that everything will be fine in a month. Nonetheless, the economic situation is improving, and it will be improving further. The forecast for global GDP for next year was reduced from 5% to 4.2%, for the US growth - from 4% to 3.2%, for the European - from 5.1% to 3.6%. The OECD expects the US economy to recover by the end of 2021. The euro-area outlook is worse. Only Germany is said to be able to get closer to the pre-crisis level. Germany’s GDP is expected to be just 1.7% lower than in the fourth quarter.

I don’t think such projections are the reason to sell the [EURUSD][1]. First, the lower are the forecasts, the easier it will be to surpass them, as it was in the euro-area in 2017. Second, the OECD is quite optimistic about China’s economic growth, which strongly impacts the euro area. The Chinese GDP could expand by 10% in 2020-2021. And finally, as [we have already discussed][4], the explosive growth of industry and foreign demand supports the export-led countries and regions. JP Morgan’s Global Manufacturing PMI is currently one of the best in a decade, and the IHS Markit Composite PMI is growing for the seventh straight month.

Dynamics of Manufacturing PMI

Source : Bloomberg

The OECD projections fuel the fuss around purchasing the US stocks. Besides, the EU’s chief medicines regulator says Pfizer’s partner, BioNTech, and US drugmaker Moderna have applied for their vaccine approval. Furthermore, the US Congress has resumed talks on the new fiscal stimulus. The new proposal of the bipartisan group is $ 908 billion. Remember, earlier, the Democrats insisted on an amount of $ 2.4 trillion; the Republicans were ready to provide only $ 650 billion to the economy.

Monthly [EURUSD][1] trading plan

Thus, my [forecast][5] suggesting the [EURUSD][1] trading range to move from 1.16-1.2 to 1.18-1.22 comes true. The price has consolidated above 1.2 and is rising to the upper border of the trading channel. I recommend buying the euro on the drawdowns.

[EURUSD][6] current rate in the Forex market:

EURUSD = 1.21051

1-day change

0.0039 (0.32%)

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Price chart of EURUSD in real time mode

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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